Paul Krugman is wrong - but don't take my word for it

2/16/13 7:17 AM EST

America's fiscal predicament is serious. The problem has become obvious in the last few years, but it has been building for decades, largely the result of promises of extensive social benefits without a corresponding willingness to pay for them.

Investors may be growing skittish about U.S. government debt levels and the disordered state of U.S. fiscal policymaking.

From the beginning of 2002, when U.S. government debt was at its most recent minimum as a share of GDP, to the end of 2012, the dollar lost 25 percent of its value, in price-adjusted terms, against a basket of the currencies of major trading partners. This may have been because investors fear that the only way out of the current debt problems will be future inflation.

More troubling for the future is that private domestic investment—the fuel for future economic growth—shows a strong negative correlation with government debt levels over several business cycles dating back to the late 1950s. Continuing high debt does not bode well in this regard.

As the biggest economy in the world, America has a lot to say about how the world works. But the economics profession is beginning to understand that high levels of public debt can slow economic growth, especially when gross general government debt rises above 85 or 90 percent of GDP.

The United States crossed that threshold in 2009, and the negative effects are probably mostly out in the future. These will come at a bad time. The U.S. share of global economic output has been falling since 1999—by nearly 5 percentage points as of 2011. As America's GDP share declined, so did its share of world trade, which may reduce U.S. influence in setting the rules for international trade.

Putting U.S. government financing on a sustainable path will require painful adjustments over a number of years—increased government revenue and painful reductions in government outlays, almost certainly including outlays for defense and international affairs. During the necessary period of fiscal adjustment and constrained government resources, U.S. international influence may decline yet further.

If you believe that I am wrong and Paul Krugman is right, if you disagree that America's debt crisis is serious today, that it is draining American soft power globally, that it is devaluing the dollar, that it is undermining our influence with international trading partners, that painful adjustments in government outlays will be necessary, and that we cannot afford to wait until 2025 to worry about Medicare and other drivers of U.S. debt, then take it up with the RAND Corporation, whose senior economist wrote everything you have read here other than this concluding paragraph. The debt crisis is real and waiting another decade to fix it is not an option. Anyone who suggests it is operates well outside the mainstream of where serious economists reside.